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Samsung Sees Rosy Outlook for ’06

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Standardmold

Date Time/Hit

2006-01-13 21:34:00 / 1125

Samsung Electronics Friday forecasted that its annual sales will breach the 60 trillion won barrier this year to create another landmark year like 2004.

The electronics giant is expecting to increase its annual revenue to 63.6 trillion won in 2006, which will exceed its record-high of 57.7 trillion won in 2004, Chu Woo-sik, Samsung’s chief of investor relations, said on Friday. Chu also hinted that Samsung’s net profit may also hit a new record high this year, breaking the old record of 10.8 trillion won.

``Both the sales volume and the profit rate in mobile phone businesses will be improved from the first quarter. Demands for LCD TV panels and flash memories are so enormous that currently we are not able to fill them,’’ Chu said during a press briefing on the company’s fourth quarter result.

``For annual profit, I cannot confirm that we are going to do better this year than 2004. But you may see many clues,’’ he said, adding that the firm expects its cash reserves to increase by 3 trillion won to over 10 trillion won at the end of this year.

Chu said that Sony’s new video game player and Microsoft’s new Windows operating system will give a big boost to Samsung’s memory chip sales from the second half of the year. Also, he said that its slim-sized mobile phones are out of stock in the United States and in Europe, where they are planning to increase shipments.

Such explanations make everything look favorable for Samsung. But it is not the first time the company has been positive about its future, and was later found to be wrong.

A year ago, the company predicted that it would achieve higher profits in 2005 after making record-high revenues and profits in 2004. But what really happened is that both its revenue and operating profit kept falling until the summer, and its yearly profit dropped by some 29 percent, with its three key businesses _ memory chips, liquid-crystal displays, and mobile phones _ all losing profitability compared with the previous year.

In addition to the difficulty of forecasting, there are eternal factors to consider as well, as Chu himself admits.

``The rapid change in foreign exchange rate is the most important factor,’’ Chu said. ``But we have set up all necessary plans, and we have a kind of buffer that will reduce possible damage. As there is more demand for our products in the market than we can meet, the exchange rate will not hamper us very much even if it continues to fall.’’

Another factor that may reduce profit is unplanned facility investments. The company is considering setting up a next-generation LCD-manufacturing line jointly with Sony. It is also planning to build a semiconductor factory in Texas, which is not included in the company’s investment plan released on Friday.

``According to our prediction model, Samsung’s revenue can be increased to 63.1 trillion won this year and to 68 trillion won next year,’’ said Michael Min of Korea Investment and Securities.

Another analyst, Park Young-ju of Woori Securities agrees. ``The 11 percent increase in revenue is nothing for Samsung. I think that more than that is possible,’’ he said. ``Samsung had made big investments until last year, so they will continue to reap benefits from it.’’